Having had a pretty static shareholder base since the float in 2007, today we found out about a new major shareholder in Oceanwood Capital Management who have bought an 8% stake.

Capital Lease Aviation is owned 51% by Avation plc (AVAP) which is deemed its parent company. I believe there is a great arbitrage opportunity here, the opposite of an arbitrage theme i played with these stocks over the last two years.

Capital Lease Aviation own 6 commercial aircraft on lease to international airlines, and with the share price at 15p current mkt cap is £14.68m

Avation own 6 of their own commercial aircraft, plus 51% of Capital Lease Aviation, and with their share price at 120p current mkt cap is £34.24m

So, if you strip out the 51% of CLA, valued at £7.49m, Avation's mkt cap for its 6 planes is valued at £26.75m, against CLA's mkt cap of £14.68m

There are slight differences between each company's fleet and leases, but not significantly, and both companies lease planes to Skywest Airlines in Australia where both companies have their roots. Avation was spun out of Skywest and CLA set up as a special purpose vehicle of Avation.

Interestingly two years ago, AVAP shares were about 30p and CLA shares were 65p. So AVAP have seen a 300% increase at the same time CLA saw a 75% fall.

Although AVAP have benefitted from a move from PLUS to the main market and have recently announced a long term deal to supply Skywest future planes to service a contract with VirginBlue, I believe the share price difference has swung too far the other way now, and have sold all my AVAP holding to buy CLA, maybe Oceanwood have similar thoughts.

I would appreciate anyone elses thoughts on this.

Trading at 50% discount to NAV, CLA seems a safe place to be, whilst waiting for the market to re-evalute the price of these two interlinked companies.

This share is currently my second largest holding.

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